What We're Reading: Ending racial inequity is good for business, report finds

From Candid.: The marginalization of African Americans has cost the U.S. economy an estimated $16 trillion in gross domestic product (GDP) between 2000 and 2020, a report from The Investment Integration Project (TIIP) finds.

Funded by the Surdna Foundation and developed in partnership with TIIP’s Racial Equity Working Group, the report, Introduction to Racial Inequity as a Systemic Risk: Why Investors Should Care and How They Can Take Action (52 pages, PDF), highlights the need for the financial industry to address the long-term systemic risk of racial inequity and promote the equitable distribution of resources, power, and economic opportunity in the United States.

According to the report, advancing racial justice and ending racial inequity are good for business, and companies in the top quartile of racial and ethnic diversity are 30 percent more likely to have financial returns above their national industry medians. Moreover, closing the wealth gap between white people and all communities of color (who are forecast to represent 52 percent of the U.S. population by 2050) would add substantively to the country’s GDP and reduce healthcare costs by more than $230 billion annually.

The report presents a roadmap to advance racial justice, while protecting corporate bottom lines. Two key actions include ensuring racial equity in senior management and on corporate boards—currently only 17.5 percent of board seats at Fortune 500 companies are held by people of color—and working against practices that propagate racial inequity in the education, employment, finance, health, and carceral systems, while promoting the full and equitable participation of people of color in society and the financial system. The report also calls for improved corporate governance and management; impact investing to leverage corporate investment portfolios, articulate fundamental values, and transparently convey beliefs about the significance of racial inequity; and engaging on a national level to hold industry leaders accountable.

“Racial inequities are among the greatest systemic threats to the health and functioning of our economy,” said Rodney Foxworth, founder of Worthmore and Racial Equity Working Group co-chair. “TIIP and Surdna convening this working group and developing this report will help to give this issue the attention it deserves in the financial market and provide investors with the understanding and tools they need to ensure our economy can continue to function in a modern society, making possible a more equitable future for us all.”

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